Warner Bros Discovery merger delay leaves HBO Max in a strategic no man’s land

The Warner Bros Discovery merger delay has left one of the world’s most storied media companies caught between two futures, unable to pursue major deals while rivals move swiftly to reshape the streaming landscape around it. Warner Bros. Discovery (WBD) had been preparing to split itself into two separate, publicly traded companies: one built around streaming and film, the other running its global linear television networks. That plan has stalled.

How the legal challenge halted the deal

A group of states led by California Attorney General Rob Bonta filed a lawsuit to block the proposed $110 billion merger between WBD and David Ellison’s Paramount Skydance. The California Department of Justice alleges the deal violates Section 7 of the Clayton Act, which prohibits mergers likely to reduce competition, and filed the case in the U.S. District Court for the Northern District of California. The core concern is scale: if allowed to proceed, the combined company would control nearly one-third of theatrical motion pictures and nearly one-third of basic cable programming in the United States alone.

Preliminary settlement talks between Bonta’s office and Paramount appeared to collapse earlier this week, and the companies now face a March 2027 antitrust trial unless the dispute is resolved sooner, according to Fox Business. That timeline matters enormously for WBD, which must now operate under the constraints of a merger agreement that was designed to last perhaps a year, not the better part of two.

Bonta told CNBC last week that resolving the states’ case would require ‘robust structural remedies,’ particularly in the pay TV and film studios businesses. Bankers and insiders have already begun weighing which WBD assets might need to be shed if Paramount moves to satisfy those demands. WBD subsidiary New Line Cinema is likely to attract bidders, CNBC reported. Some of WBD’s pay TV networks, including the Turner channels TNT and TBS, or lifestyle networks such as HGTV, may also be considered.

The Warner Bros Discovery merger delay: what WBD can still do

The merger agreement does not leave WBD entirely static. Interim operating covenants allow it to function as an independent company while the deal moves towards closing, a provision that WBD executives specifically pushed for during negotiations with potential buyers, first Netflix and then Paramount, according to a person familiar with the matter. The agreement also states that where Paramount’s approval is needed, that consent cannot be ‘unreasonably withheld.’

That means WBD can still pursue licensing deals and partnerships. Licensing from its HBO library has already proven lucrative: titles such as Sex and the City, Insecure and Band of Brothers have been licensed to Netflix, and Westworld to free, ad-supported streaming services. During its August earnings call, CFO Gunnar Wiedenfels described ‘very healthy demand’ for WBD content. Film and TV creators are still pitching projects to the company, a second person familiar with the matter told CNBC.

WBD CEO David Zaslav has said executives have ‘been trying to drive the value of the company’ in the lead-up to the merger closing. The deal terms give WBD further incentive to stay the course: Paramount has agreed to pay $31 per share to acquire WBD, and if regulatory approval is delayed beyond September, Paramount will begin owing a ‘ticking fee,’ increasing the overall deal value with time.

Media veteran Tom Rogers, who the report identifies as currently a senior adviser to Versant Media Group and executive chairman of AI film and TV production company Fountain 0, put it plainly. ‘This is as good a deal as Warner Bros. Discovery’s going to get, and they are going to have a difficult time totally walking away here with no more than a breakup fee,’ Rogers said. ‘So I think they have plenty of incentive to also figure out how this deal could get done.’

Streaming growth and the competitive pressure building outside

The strategic cost of waiting is real. WBD posted record-breaking revenue growth in its streaming segment in its most recent earnings report, but much of that came from international expansion, and that expansion has now largely run its course. WBD executives have reportedly told staff not to expect streaming growth on the same scale going forward. The company says future gains will come from its ad-supported tier and additions in smaller markets, with a target of surpassing 150 million global streaming subscribers by the end of this year.

Meanwhile, potential streaming partners are finding each other. NBCUniversal’s Peacock has agreed to embed its content into YouTube Premium. Leadership at NBCUniversal and Fox Corp. have indicated openness to further bundles. Netflix is reported to be considering tie-ups with peers. HBO Max is already bundled with Disney’s streaming services, but with its future ownership unresolved, new long-term partnerships are harder to lock in.

MoffetNathanson analyst Robert Fishman, writing in an August note following Paramount’s earnings, said the two companies ‘own and operate subscale streaming services’ individually, and that combined they would stand a better chance against larger rivals. ‘If the deal falls through, then both streamers are going to find themselves saddled with standalone platforms that are unlikely to be able to compete longer term,’ Fishman said. The March 2027 trial date means the industry may not have clarity for some time yet.